Why do you think the Fed is scared? We know what A modern bank failure looks like but we don't know what several bank failures in succession looks like. The above is not an overly dramatic description of systemic bank failures.
>
>> If the US had allowed banks to simply collapse and refused to
>> guarantee the illiquid assets under TARP the world-wide faith in the
>> US Treasury as ultimate guarantor of private property would be
>> shattered.
>
> I don't think these are the two choices: TARP or everything fails :-)
>
> The ongoing activities of the Fed *outside* of the scope of TARP
> should be enough to convince you of the seriousness of the effort and
> the wide set of tools they have to try to help with this situation.
>
> /jordan
It didn't have to be TARP but it had to be a clear signal and unfortunately TARP was the only clear signal currently available from this administration. Is it that you believe that there was time to craft a better plan than TARP such a nationalizing firms or do you simply believe that TARP will do nothing in the short-term to help? Do you believe both? I hadn't read Krugman in a few weeks until this last Sunday but his words of Oct. 2nd pretty well sum up my feelings with regards to TARP
"I hope that it passes, simply because we’re in the middle of a financial panic, and another no vote would make the panic even worse. For the fact is that the plan on offer is a stinker — and inexcusably so. The financial system has been under severe stress for more than a year, and there should have been carefully thought-out contingency plans ready to roll out in case the markets melted down. But at best, the plan will buy some time to seek a real solution to the crisis. And that raises the question: Do we have that time?"
Not mentioned is the fact that Paulson discussed last summer the idea that the Treasury might have to buy illiquid assets to keep money moving and he still didn't bother to craft a plan to do so!
I'm probably over posted today and since I just blew out the intermediate spindle drive gear in my Bridgeport I'll probably not respond anymore today. I'm sure Dymtri will be crestfallen to hear this.
John Thornton